Forexpros – The U.S. dollar rallied to a three- week high against its Canadian counterpart on Wednesday, as concerns that Italian borrowing costs have risen to unsustainable levels bolstered demand for the safe haven greenback.
USD/CAD hit 1.0231 during early U.S. trade, the pair’s highest since October 20; the pair subsequently consolidated at 1.0190, jumping 1.02%.
The pair was likely to find support at 1.0077, the days low and resistance at 1.0263, the high of October 20.
The greenback strengthened broadly after the yield on two-year and 10-year Italian government bonds climbed above the 7% threshold which prompted Greece, Ireland, and Portugal to seek external financial aid, after a Paris based clearing house hiked the margin call on Italian bonds.
The move came after Italian Prime Minister Silvio Berlusconi announced late Tuesday that he would step down after parliament approves next year’s budget, but uncertainty remained over whether Italy’s new government will be able to shore up growth and implement austerity measures.
Meanwhile, officials in Greece were scrambling to name a new prime minister, as efforts continued to avert an imminent default by implementing a new bailout program.
The broadly stronger U.S. dollar also weighed on crude oil prices, with the December crude contract on the New York Mercantile Exchange tumbling 1.36% to trade at two-day low of USD95.53 a barrel.
Raw materials, including oil account for about half of Canada’s export revenue.
Elsewhere, the Canadian dollar was higher against the euro, with EUR/CAD shedding 0.68% to hit 1.3857.
Also Wednesday, official data showed that Canada’s new home price index rose in line with expectations in September, gaining 0.2% after rising by 0.1% the previous month.
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